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Congress challenges T-Mobile, Sprint on merits of merger

February 13, 2019

 

The leaders of T-Mobile and Sprint today testified before the House Subcommittee on Communications and Technology and answered questions from lawmakers about the merits and potential impacts of their proposed merger. The points of contention—namely jobs, rural coverage and reduced competition in the market—have been debated since the merger plan was first announced in April 2018, but today’s hearing effectively underlined the ongoing rancorous debate as the FCC and Department of Justice near final decisions.

 

Sprint Chairman Marcelo Claure and T-Mobile CEO John Legere argued that while most mergers lead to job losses, the outcome of their merger will be different. Claure called it a “growth story,” and Legere said it will be a “tremendous jobs creator.”

 

Chris Shelton, president of the Communications Workers of America, called those claims “bull” during his testimony and reiterated the union’s position that the merger will lead to 30,000 lost jobs and higher prices. “Without binding and enforceable commitments, and I mean commitments that have no loopholes, such promises are just cheap sales and talk, and are easily broken,” he said. “Trusting T-Mobile and Sprint with American jobs [is like] trusting a vampire at a blood bank.”

 

The nation’s third- and fourth-largest carriers compete with each other today, and as such many of their stores, especially those for prepaid brands Boost and MetroPCS, tend to be in close proximity to each other, according to Shelton. “If the companies merge, why would they keep two neighboring stores open? Chances are they won’t,” Shelton said. Moreover, New T-Mobile would have twice the number of stores that AT&T and Verizon have now, “so stores are going to close,” he said.

 

As a condition for approval from the New York Public Service Commission, T-Mobile and Sprint committed last week to maintaining the number of employees they have in New York for at least three years following the merger. T-Mobile also issued a filing with the FCC last week wherein the company pledged to maintain or cut prices for three years if the deal is approved. Opponents of the merger argue that those commitments don’t go far enough and continue to dispute the companies' claims regarding jobs, rural coverage and 5G build-out requirements.

 

“Our merger will be jobs positive from day one and going forward,” Legere said. “The build-out of our 5G network, investment in new customer care centers, an expansion into new services like video distribution, broadband and enterprise services, means thousands more jobs than the two companies would have needed. In the first year, we will have thousands more employees than the standalone companies combined. By 2024, we will have 11,000 more employees. Our critics are wrong about the impact on jobs.”

 

Another major point of debate centers around 5G, particularly the spectrum, capital and other resources needed to deploy a nationwide 5G network. While Claure said Sprint is “no longer in dire financial straits,” he told lawmakers the company cannot upgrade its network on its own because it lacks low-band spectrum and capital.

 

Claure testified that Sprint would need up to $25 billion to build a 5G network as a standalone company, and without positive cash flow the company would have to take on more debt and raise prices to pay off that debt. Claure said the merger would create eight times more network capacity than the respective companies have on their own today. The merger would also lead to an 87% decline in the price per gigabyte of data, according to Legere.

 

Legere was also unequivocal in comments he made about the network equipment that will power 5G. Some opponents of the merger have raised concerns about T-Mobile and Sprint using equipment from Huawei or ZTE. Both Chinese companies have repeatedly denied that they pose a security threat, but the U.S. government and others have called their operations into question, claiming that Chinese telecom vendors work at the behest of the Chinese government and that their equipment could be used to spy on Americans and U.S. allies.

 

“Let me be clear,” Legere said during testimony, unprompted by questions. “There is no Huawei or ZTE equipment in our network today and there never will be. Not today, not tomorrow, not ever.” In written testimony provided to the subcommittee, he added: “New T-Mobile will buy network equipment only from trusted network equipment suppliers with a strong security track record in the United States.”

 

Legere, Claure, Shelton and others are still facing questions from the subcommittee today. The were scheduled to testify before the House Judiciary’s Subcommittee on Antitrust, Commercial and Administrative Law on Thursday, but that hearing has been postponed.

 

Source: https://www.fiercewireless.com/wireless/congress-challenges-t-mobile-sprint-merits-merger

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